UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
x Quarterly
Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For
the
quarterly period ended June 30, 2008
OR
o Transition
Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Commission
File Number 001-09279
ONE
LIBERTY PROPERTIES, INC.
(Exact
name of registrant as specified in its charter)
MARYLAND
|
|
13-3147497
|
(State
or other jurisdiction of
|
|
(I.R.S.
employer
|
incorporation
or organization)
|
|
identification
number)
|
60 Cutter Mill Road, Great Neck, New York
|
|
11021
|
(Address of principal executive offices)
|
|
(Zip code)
|
(516)
466-3100
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes x No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
definition of “large accelerated filer,” “accelerated filer” and “small
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Non-accelerated
filer ¨ (Do
not
check if a smaller reporting company) Smaller
reporting company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
¨ No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
As
of
August 1, 2008, the registrant had 10,170,284 shares of common stock
outstanding.
Part
I –
FINANCIAL INFORMATION
Item
1
Financial
Statements
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Amounts
in Thousands, Except Per Share Data)
|
|
June
30,
2008
|
|
December
31,
2007
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Real
estate investments, at cost
|
|
|
|
|
|
Land
|
|
$
|
74,485
|
|
$
|
72,386
|
|
Buildings
and improvements
|
|
|
311,968
|
|
|
307,884
|
|
|
|
|
386,453
|
|
|
380,270
|
|
Less
accumulated depreciation
|
|
|
40,409
|
|
|
36,228
|
|
|
|
|
346,044
|
|
|
344,042
|
|
Investment
in unconsolidated joint ventures
|
|
|
5,883
|
|
|
6,570
|
|
Cash
and cash equivalents
|
|
|
23,258
|
|
|
25,737
|
|
Restricted
cash
|
|
|
7,788
|
|
|
7,742
|
|
Unbilled
rent receivable
|
|
|
10,353
|
|
|
9,893
|
|
Escrow,
deposits and other receivables
|
|
|
1,361
|
|
|
2,465
|
|
Investment
in BRT Realty Trust at market (related party)
|
|
|
360
|
|
|
459
|
|
Deferred
financing costs
|
|
|
2,816
|
|
|
3,119
|
|
Other
assets (including available-for-sale securities at
market of $367 and $1,024)
|
|
|
1,032
|
|
|
1,672
|
|
Unamortized
intangible lease assets
|
|
|
4,983
|
|
|
4,935
|
|
Total
assets
|
|
$
|
403,878
|
|
$
|
406,634
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Mortgages
and loan payable
|
|
$
|
220,309
|
|
$
|
222,035
|
|
Dividends
payable
|
|
|
3,666
|
|
|
3,638
|
|
Accrued
expenses and other liabilities
|
|
|
3,781
|
|
|
4,252
|
|
Unamortized
intangible lease liabilities
|
|
|
5,708
|
|
|
5,470
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
233,464
|
|
|
235,395
|
|
Commitments
and contingencies
|
|
|
-
|
|
|
-
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
Preferred
stock, $1 par value; 12,500 shares authorized; none issued
|
|
|
-
|
|
|
-
|
|
Common
stock, $1 par value; 25,000 shares authorized; 9,924 and 9,906
shares
issued and outstanding
|
|
|
9,924
|
|
|
9,906
|
|
Paid-in
capital
|
|
|
137,800
|
|
|
137,076
|
|
Accumulated
other comprehensive income – net unrealized gain on available-for-sale
securities
|
|
|
88
|
|
|
344
|
|
Accumulated
undistributed net income
|
|
|
22,602
|
|
|
23,913
|
|
Total
stockholders’ equity
|
|
|
170,414
|
|
|
171,239
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
403,878
|
|
$
|
406,634
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(Amounts
in Thousands, Except Per Share Data)
(Unaudited)
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$
|
9,686
|
|
$
|
9,642
|
|
$
|
19,438
|
|
$
|
19,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,275
|
|
|
2,086
|
|
|
4,326
|
|
|
4,173
|
|
General
and administrative (including $547, $572, $1,094
and $1,146, respectively, to related party)
|
|
|
1,601
|
|
|
1,588
|
|
|
3,198
|
|
|
3,284
|
|
Impairment
charge
|
|
|
752
|
|
|
-
|
|
|
752
|
|
|
-
|
|
Federal
excise tax
|
|
|
(11
|
)
|
|
14
|
|
|
-
|
|
|
50
|
|
Real
estate expenses
|
|
|
61
|
|
|
59
|
|
|
121
|
|
|
130
|
|
Leasehold
rent
|
|
|
77
|
|
|
77
|
|
|
154
|
|
|
154
|
|
Total
operating expenses
|
|
|
4,755
|
|
|
3,824
|
|
|
8,551
|
|
|
7,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
4,931
|
|
|
5,818
|
|
|
10,887
|
|
|
11,444
|
|
Other
income and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in earnings of unconsolidated joint ventures
|
|
|
152
|
|
|
149
|
|
|
297
|
|
|
293
|
|
Gain
on dispositions of real estate of unconsolidated joint
ventures
|
|
|
-
|
|
|
-
|
|
|
297
|
|
|
583
|
|
Gain
on sale of excess unimproved land
|
|
|
1,830
|
|
|
-
|
|
|
1,830
|
|
|
-
|
|
Interest
and other income
|
|
|
121
|
|
|
461
|
|
|
331
|
|
|
1,045
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
(3,632
|
)
|
|
(3,733
|
)
|
|
(7,303
|
)
|
|
(7,468
|
)
|
Amortization
of deferred financing costs
|
|
|
(156
|
)
|
|
(159
|
)
|
|
(314
|
)
|
|
(320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
|
3,246
|
|
|
2,536
|
|
|
6,025
|
|
|
5,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income from discontinued operations
|
|
|
-
|
|
|
(4
|
)
|
|
-
|
|
|
101
|
|
Net
income
|
|
$
|
3,246
|
|
$
|
2,532
|
|
$
|
6,025
|
|
$
|
5,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
- basic and diluted
|
|
|
10,219
|
|
|
10,055
|
|
|
10,185
|
|
|
10,028
|
|
Net
income per common share – basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
.32
|
|
$
|
.25
|
|
$
|
.59
|
|
$
|
.56
|
|
Income
from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
.01
|
|
Net
income per common share
|
|
$
|
.32
|
|
$
|
.25
|
|
$
|
.59
|
|
$
|
.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
distributions per share of common stock
|
|
$
|
.36
|
|
$
|
.36
|
|
$
|
.72
|
|
$
|
.72
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
For
the
six month period ended June 30, 2008 (Unaudited)
and
the
year ended December 31, 2007
(Amounts
in Thousands)
|
|
Common
Stock
|
|
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Accumulated
Undistributed
Net Income
|
|
Total
|
|
Balances,
January 1, 2007
|
|
$
|
9,823
|
|
$
|
134,826
|
|
$
|
935
|
|
$
|
34,541
|
|
$
|
180,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
– common stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(21,218
|
)
|
|
(21,218
|
)
|
Repurchase
of common stock
|
|
|
(159
|
)
|
|
(3,053
|
)
|
|
-
|
|
|
-
|
|
|
(3,212
|
)
|
Shares
issued through dividend reinvestment plan
|
|
|
237
|
|
|
4,482
|
|
|
-
|
|
|
-
|
|
|
4,719
|
|
Restricted
stock vesting
|
|
|
5
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
-
|
|
Compensation
expense – restricted stock
|
|
|
-
|
|
|
826
|
|
|
-
|
|
|
-
|
|
|
826
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,590
|
|
|
10,590
|
|
Other
comprehensive income – net unrealized loss on available-for-sale
securities
|
|
|
-
|
|
|
-
|
|
|
(591
|
)
|
|
-
|
|
|
(591
|
)
|
Comprehensive
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2007
|
|
|
9,906
|
|
|
137,076
|
|
|
344
|
|
|
23,913
|
|
|
171,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
– common stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,336
|
)
|
|
(7,336
|
)
|
Repurchase
of common stock
|
|
|
(65
|
)
|
|
(1,039
|
)
|
|
-
|
|
|
-
|
|
|
(1,104
|
)
|
Shares
issued through dividend reinvestment plan
|
|
|
83
|
|
|
1,318
|
|
|
-
|
|
|
-
|
|
|
1,401
|
|
Compensation
expense – restricted stock
|
|
|
-
|
|
|
445
|
|
|
-
|
|
|
-
|
|
|
445
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6,025
|
|
|
6,025
|
|
Other
comprehensive income- net unrealized loss on available-for-sale
securities
|
|
|
-
|
|
|
-
|
|
|
(
256
|
)
|
|
-
|
|
|
(
256
|
)
|
Comprehensive
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
June 30, 2008
|
|
$
|
9,924
|
|
$
|
137,800
|
|
$
|
88
|
|
$
|
22,602
|
|
$
|
170,414
|
|
See
accompanying notes to consolidated financial statements.
ONE
LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts
in Thousands)
(Unaudited)
|
|
Six
Months Ended
June
30,
|
|
|
|
2008
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
income
|
|
$
|
6,025
|
|
$
|
5,678
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Gain
on sale of excess unimproved land and other
|
|
|
(1,830
|
)
|
|
(118
|
)
|
Increase
in rental income from straight-lining of rent
|
|
|
(460
|
)
|
|
(1,224
|
)
|
Increase
in rental income from amortization of intangibles relating to
leases
|
|
|
(121
|
)
|
|
(126
|
)
|
Impairment
charge
|
|
|
752
|
|
|
-
|
|
Amortization
of restricted stock expense
|
|
|
445
|
|
|
424
|
|
Equity
in earnings of unconsolidated joint ventures
|
|
|
(297
|
)
|
|
(293
|
)
|
Gain
on disposition of real estate related to unconsolidated joint
ventures
|
|
|
(297
|
)
|
|
(583
|
)
|
Distributions
of earnings from unconsolidated joint ventures
|
|
|
273
|
|
|
258
|
|
Depreciation
and amortization
|
|
|
4,326
|
|
|
4,173
|
|
Amortization
of financing costs
|
|
|
314
|
|
|
320
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Decrease
in escrow, deposits and other receivables
|
|
|
1,092
|
|
|
214
|
|
Decrease
in accrued expenses and other liabilities
|
|
|
(519
|
)
|
|
(412
|
)
|
Net
cash provided by operating activities
|
|
|
9,703
|
|
|
8,311
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
(Purchase)
reduction of real estate and improvements
|
|
|
(5,098
|
)
|
|
41
|
|
Net
proceeds from sale of excess unimproved land
|
|
|
2,977
|
|
|
-
|
|
Investment
in unconsolidated joint ventures
|
|
|
(374
|
)
|
|
-
|
|
Distributions
of return of capital from unconsolidated joint ventures
|
|
|
1,357
|
|
|
111
|
|
Net
proceeds from sale of available-for-sale securities
|
|
|
519
|
|
|
161
|
|
Purchase
of available-for-sale securities
|
|
|
-
|
|
|
(521
|
)
|
Net
cash used in investing activities
|
|
|
(619
|
)
|
|
(208
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Repayment
of mortgages payable
|
|
|
(4,497
|
)
|
|
(2,351
|
)
|
Payment
of financing costs
|
|
|
(11
|
)
|
|
(681
|
)
|
Increase
in restricted cash
|
|
|
(46
|
)
|
|
(184
|
)
|
Cash
distributions – common stock
|
|
|
(7,306
|
)
|
|
(7,199
|
)
|
Repurchase
of common stock
|
|
|
(1,104
|
)
|
|
-
|
|
Issuance
of shares through dividend reinvestment plan
|
|
|
1,401
|
|
|
951
|
|
Net
cash used in financing activities
|
|
|
(11,563
|
)
|
|
(9,464
|
)
|
Net
decrease in cash and cash equivalents
|
|
|
(2,479
|
)
|
|
(1,361
|
)
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
25,737
|
|
|
34,013
|
|
Cash
and cash equivalents at end of period
|
|
$
|
23,258
|
|
$
|
32,652
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
$
|
7,346
|
|
$
|
7,438
|
|
Supplemental
schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Assumption
of mortgages payable in connection with purchase of real
estate
|
|
$
|
2,771
|
|
$
|
-
|
|
Purchase
accounting allocations
|
|
|
(227
|
)
|
|
-
|
|
See
accompanying notes to consolidated financial statements.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
Note
1 –
Organization
and Background
One
Liberty Properties, Inc. (“OLP”) was incorporated in 1982 in the state of
Maryland. OLP is a self-administered and self-managed real estate investment
trust (“REIT”). OLP acquires, owns and manages a geographically diversified
portfolio of retail, including retail furniture stores, industrial, office,
flex, health and fitness and other properties, a substantial portion of which
are under long-term net leases. As of June 30, 2008, OLP owns 68 properties
and
holds a 50% tenancy in common interest in one property. OLP’s joint ventures own
five properties. The 74 properties are located in 28 states.
Note
2 -
Basis
of Preparation
The
accompanying interim unaudited consolidated financial statements as of June
30,
2008 and 2007 and for the six and three months ended June 30, 2008 and 2007
reflect all normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for such interim
periods. The results of operations for the six and three months ended June
30,
2008 are not necessarily indicative of the results for the full
year.
The
preparation of the financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
The
consolidated financial statements include the accounts and operations of OLP
and
its wholly-owned subsidiaries (collectively, the “Company”). Material
intercompany items and transactions have been eliminated. The Company accounts
for its investments in unconsolidated joint ventures under the equity method
of
accounting as the Company (1) is primarily the managing member, but does not
exercise substantial operating control over these entities pursuant to EITF
04-05, and (2) such entities are not variable-interest entities pursuant to
FASB
Interpretation No. 46R, “Consolidation of Variable Interest Entities.” These
investments are recorded initially at cost, as investments in unconsolidated
joint ventures, and subsequently adjusted for equity in earnings and cash
contributions and distributions.
Certain
amounts reported in previous consolidated financial statements have been
reclassified in the accompanying consolidated financial statements to conform
to
the current year’s presentation primarily to reclassify a property that was
presented as held for sale at December 31, 2007 and as a real estate investment
at June 30, 2008 and to reclassify such property’s operations from discontinued
operations to continuing operations.
These
statements should be read in conjunction with the consolidated financial
statements and related notes which are included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2007.
Note
3 -
Earnings
Per Common Share
For
the
six and three months ended June 30, 2008 and 2007, basic earnings per share
were
determined by dividing net income for the period by the weighted average number
of shares of the Company’s common stock outstanding, which includes unvested
restricted stock during each period.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
3 -
Earnings
Per Common Share (Continued)
Diluted
earnings per share reflect the potential dilution that could occur if securities
or other contracts exercisable for, or convertible into, common stock were
exercised or converted or resulted in the issuance of common stock that shared
in the earnings of the Company. For the six and three months ended June 30,
2008
and 2007, diluted earnings per share were determined by dividing net income
for
the period by the total of the weighted average number of shares of common
stock
outstanding using the treasury stock method. There were no outstanding options
to purchase shares of common stock in the six and three months ended June 30,
2008 and 2007.
Note
4 -
Investment
in Unconsolidated Joint Ventures
On
March
25, 2008, one of the Company’s unconsolidated joint ventures sold its only
property, which was vacant, for a consideration of $1,302,000, net of closing
costs. The sale resulted in a gain to the Company of $297,000 (after giving
effect to the Company’s $480,000 share of a direct write down taken by the joint
venture in 2006).
On
March
14, 2007, another of the Company’s unconsolidated joint ventures sold its only
property, a vacant parcel of land, for a consideration of $1,250,000 to a former
tenant of the joint venture. The sale resulted in a gain to the Company of
$583,000 (after giving effect to the Company’s $1,581,000 share of direct write
downs taken by the joint venture in prior years).
The
Company’s remaining five unconsolidated joint ventures each own and operate one
property, including one recently organized joint venture. At June 30, 2008
and
December 31, 2007, the Company’s equity investment in unconsolidated joint
ventures totaled $5,883,000 and $6,570,000, respectively, and in addition to
the
gain on sale of properties of $297,000 and $583,000, respectively, contributed
$297,000 and $293,000 in equity earnings for the six months ended June 30,
2008
and 2007, respectively. For the three months ended June 30, 2008 and 2007,
they
contributed $152,000 and $149,000 in equity earnings, respectively.
Note
5 -
Property
Acquisitions and Dispositions
In
May
2008, the Company sold a five acre parcel of excess, unimproved land to an
unrelated third party for a sales price of $3,150,000 and realized a gain of
$1,830,000. This land, adjacent to a flex property owned by the Company, had
been acquired by the Company as part of the purchase of the flex property in
2000.
In
June
2008, the Company acquired approximately two acres of land improved with an
18,500 square foot building in Massachusetts, subject to a long term ground
lease with a single retail tenant. The purchase price was $2,100,000, which
was
paid in cash.
In
January and February 2008, the Company acquired two retail properties in
Massachusetts subject to long term net leases, each leased by a single tenant.
The aggregate purchase price for both properties was $5,500,000, of which
approximately $1,934,000 and $837,000 represented the assumption of existing
first mortgages encumbering each property (to two separate financial
institutions) and the balance was paid in cash.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
6 –
Impairment
Charge
At
June
30, 2008, the Company determined that as a result of current economic
conditions, the market rent of a retail property is significantly lower than
the
rent which continues to be paid currently under a lease expiring in 2013, by
the
tenant who vacated the property in 2006 and who has been unable to sublet the
property. Management has estimated the value of the property based on estimated
current market rates and recorded an impairment charge of $752,000 as a direct
write-down of the investment on the balance sheet and depreciation will be
calculated using the new basis. In connection with such decrease, the Company
reversed $178,000 of unbilled “straight line” rent receivable during the three
months ended June 30, 2008.
Note
7 –
Reclassification
of “Held for Sale” Property
A
property which had been classified as “held for sale” since August 2007 was
taken off the market, and at June 30, 2008 was reclassified as a real estate
investment and for the six and three months ended June 30, 2008 and 2007 the
operations of the property were reclassified from discontinued to continuing
operations. In connection with management’s decision to not sell the property,
the Company recorded $157,000 of “catch-up” depreciation that would have been
recorded had the property been continuously classified as “held and used” for
the period of August 2007 through March 2008.
Note
8 -
Common
Stock Dividend Distribution
On
June
13, 2008, the Board of Directors declared a quarterly cash distribution of
$.36
per share totaling $3,666,000 on the Company's common stock, which was paid
on
July 7, 2008 to stockholders of record on June 25, 2008.
Note
9 -
Comprehensive
Income
Comprehensive
income for the six and three months ended June 30, 2008 and 2007 are as follows
(amounts in thousands):
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net
income
|
|
$
|
3,246
|
|
$
|
2,532
|
|
$
|
6,025
|
|
$
|
5,678
|
|
Other
comprehensive income –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on available-for-sale securities
|
|
|
(159
|
)
|
|
(142
|
)
|
|
(256
|
)
|
|
(214
|
)
|
Comprehensive
income
|
|
$
|
3,087
|
|
$
|
2,390
|
|
$
|
5,769
|
|
$
|
5,464
|
|
Accumulated
other comprehensive income, which is solely comprised of the net unrealized
gain
on available-for-sale securities was $88,000 and $344,000 at June 30, 2008
and
December 31, 2007, respectively.
Note
10 –
Restricted
Stock
The
Company adopted the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 123R, “Share-Based Payments,” effective January 1, 2006. SFAS No.
123R established financial accounting and reporting standards for stock-based
employee compensation plans, including all arrangements by which employees
receive shares of stock or other equity instruments of the employer, or the
employer incurs liabilities to employees in amounts based on the price of the
employer’s stock. The statement also defined a fair value based method of
accounting for an employee stock option or similar equity instrument whereby
the
fair-value is recorded based on the market value of the common stock on the
grant date and is amortized to general and administrative expense over the
respective vesting periods.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
10 –
Restricted
Stock (continued)
The
Company’s 2003 Stock Incentive Plan (the “Incentive Plan”), approved by the
Company’s stockholders in June 2003, provides for the granting of restricted
shares. The maximum number of shares of the Company’s common stock that may be
issued pursuant to the Incentive Plan is 275,000.
The restricted stock grants are valued at the fair value as of the date of
the
grant and all restricted share awards made to date provide for vesting upon
the
fifth anniversary of the date of grant and
under
certain circumstances may vest earlier. For accounting purposes, the restricted
stock is not included in the outstanding shares shown on the balance sheet
until
they vest; however dividends are paid on the unvested shares. The value of
such
grants is initially deferred, and amortization of amounts deferred is being
charged to operations over the respective vesting periods.
|
|
Three
Months Ended
June
30,
|
|
Six
Months Ended
June
30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Restricted
share grants
|
|
|
-
|
|
|
-
|
|
|
50,550
|
|
|
51,225
|
|
Average
per share grant price
|
|
$
|
-
|
|
$
|
-
|
|
$
|
17.50
|
|
$
|
24.50
|
|
Recorded
as deferred compensation
|
|
$
|
-
|
|
$
|
-
|
|
$
|
885,000
|
|
$
|
1,255,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
charge to operations, all outstanding restricted grants
|
|
$
|
239,000
|
|
$
|
265,000
|
|
$
|
445,000
|
|
$
|
424,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
beginning of period
|
|
|
236,350
|
|
|
191,400
|
|
|
186,300
|
|
|
140,175
|
|
Grants
|
|
|
-
|
|
|
-
|
|
|
50,550
|
|
|
51,225
|
|
Vested
during period
|
|
|
-
|
|
|
(5,000
|
)
|
|
-
|
|
|
(5,000
|
)
|
Forfeitures
|
|
|
(75
|
)
|
|
-
|
|
|
(575
|
)
|
|
-
|
|
Non-vested
end of period
|
|
|
236,275
|
|
|
186,400
|
|
|
236,275
|
|
|
186,400
|
|
Through
June 30, 2008, a total of 243,075 shares were issued and 31,925 shares remain
available for grant pursuant to the Incentive Plan, and approximately $2,619,000
remains as deferred compensation and will be charged to expense over the
remaining respective vesting periods. The weighted average vesting period is
approximately 2.7 years.
Note
11 –
Line
of Credit
The
Company has a $62,500,000 revolving credit facility (“Facility”) with VNB New
York Corp., Bank Leumi USA, Israel Discount Bank of New York and Manufacturers
and Traders Trust Company. The Facility matures on March 31, 2010 and provides
that the Company pays interest at the lower of LIBOR plus 2.15% or at the bank’s
prime rate on funds borrowed and has an unused facility fee of ¼%. In April 2007
the Company paid approximately $640,000 in fees and closing costs, which are
being amortized over the term of the Facility. There is no balance outstanding
under the Facility at June 30, 2008.
One
Liberty Properties, Inc. and Subsidiaries
Notes
to
Consolidated Financial Statements
(Continued)
Note
12 -
New
Accounting Pronouncements
In
September 2006, the FASB issued Statement No. 157, “Fair
Value Measurements” (“SFAS
No. 157”). SFAS No. 157 provides guidance for using fair value to measure
certain financial assets and liabilities. This statement clarifies the principle
that fair value should be based on the assumptions that market participants
would use when pricing the asset or liability. SFAS No.157 establishes a fair
value hierarchy, giving the highest priority to quoted prices in active markets
and the lowest priority to unobservable data. SFAS No. 157 applies whenever
other standards require assets or liabilities to be measured at fair value.
The
Company adopted SFAS No. 157 on January 1, 2008.
The
Company’s financial assets and liabilities, other than fixed-rate mortgages and
loan payable, are generally
short-term in nature, or bear interest at variable current market rates, and
consist of cash and cash equivalents, restricted cash, rents and other
receivables, other assets, and accounts payable and accrued expenses. The
carrying amounts of these assets and liabilities are not measured at fair value
on
a
recurring basis, but are considered to be recorded at amounts that approximate
fair value due to their short-term nature. The valuation of the Company’s
available-for-sale securities ($367,000 at June 30, 2008), was determined
to be a Level 1 within the valuation hierarchy established by SFAS No. 157,
and
are approximated on current market quotes received from financial sources that
trade such securities. Accordingly, the adoption of SFAS No. 157, as it
relates to fair value measurements of financial assets and liabilities, has
not
had a material effect on the Company’s consolidated financial
statements.
In
February 2007, the FASB issued Statement No. 159, “The
Fair Value Option for Financial Assets and
Financial Liabilities” ("SFAS
No. 159"). SFAS
No.
159 provides companies with an option to report
selected financial assets and liabilities at fair value. The objective of SFAS
No. 159 is to reduce both complexity in accounting for financial instruments
and
the volatility in earnings caused by measuring related assets and liabilities
differently. The FASB believes that SFAS No. 159 helps to mitigate this type
of
accounting-induced volatility by enabling companies to report related assets
and
liabilities at fair value, which would likely reduce the need for companies
to
comply with detailed rules for hedge accounting. SFAS No. 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar
types
of assets and liabilities. The Company adopted SFAS No. 159 and has determined
that it has no effect on its consolidated financial statements.
In
December 2007, the FASB issued Statement No. 141 (R), “Business Combinations
- a replacement of FASB Statement No. 141”
(“SFAS
No. 141 (R)”), which applies to all transactions or events in which an entity
obtains control of one or more businesses. SFAS No. 141 (R) (i) establishes
the
acquisition-date fair value as the measurement objective for all assets acquired
and liabilities assumed, (ii) requires expensing of most transaction costs,
and
(iii) requires the acquirer to disclose to investors and other users of the
information needed to evaluate and understand the nature and financial effect
of
the business combination. SFAS No. 141 (R) is effective for fiscal years
beginning after December 15, 2008 and early adoption is not permitted. The
Company has not completed its evaluation of the impact of SFAS No. 141 (R)
and
the effect that such pronouncement will have on its consolidated financial
statements.
In
December 2007, the FASB issued Statement No. 160, “Non-controlling
Interests in Consolidated Financial Statements an amendment of ARB No
51”
(“SFAS
No. 160”). SFAS No. 160 requires non-controlling interests in consolidated
subsidiaries to be displayed in the statement of financial position as a
separate component of equity. Earnings and losses attributable to
non-controlling interests are no longer reported as part of consolidated
earnings, rather they are disclosed on the face of the income statement. This
statement is effective in fiscal years beginning after December 15, 2008.
Adoption is prospective and early adoption is not permitted. The Company is
evaluating the impact that the adoption of SFAS No. 160 will have on its
consolidated financial statements, but it is not expected to be significant.
Item
2.
Management's
Discussion And Analysis Of Financial Condition And Results Of
Operations
Forward-Looking
Statements
With
the
exception of historical information, this quarterly report on Form 10-Q contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended. We intend such forward-looking statements
to
be covered by the safe harbor provision for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995 and include this
statement for purposes of complying with these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
our future plans, strategies and expectations, are generally identifiable by
use
of the words "may," "will," "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar expressions or variations thereof.
Forward-looking statements should not be relied on since they involve known
and
unknown risks, uncertainties and other factors which are, in some cases, beyond
our control and which could materially affect actual results, performance or
achievements. Investors are cautioned not to place undue reliance on any
forward-looking statements.
Overview
We
are a
self-administered and self-managed real estate investment trust, or REIT, and
we
primarily own real estate that we net lease to tenants. As of June 30, 2008,
we
own 68 properties, hold a 50% tenancy in common interest in one property and
participate in five joint ventures which own a total of five properties. These
74 properties are located in 28 states.
We
have
elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended. To qualify as a REIT, we must meet a number of organizational and
operational requirements, including a requirement that we distribute currently
at least 90% of ordinary taxable income to our stockholders. We intend to comply
with these requirements and to maintain our REIT status.
Our
principal business strategy is to acquire improved, commercial properties
subject to long-term net leases. We acquire properties for their value as
long-term investments and for their ability to generate income over an extended
period of time. We have borrowed funds in the past to finance the purchase
of
real estate and we expect to do so in the future.
During
2008 we have acquired three single tenant retail properties for an aggregate
purchase price of approximately $7.6 million. We are negotiating a number of
acquisitions that we hope to conclude in 2008 and continue to seek additional
properties to acquire.
Our
rental properties are generally leased to corporate tenants under operating
leases, substantially all of which are noncancellable. Substantially all of
our
lease agreements are net lease arrangements that require the tenant to pay
not
only rent, but also substantially all of the operating expenses of the leased
property, including maintenance, taxes, utilities and insurance. A majority
of
our lease agreements provide for periodic rental increases and certain of our
other leases provide for increases based on the consumer price
index.
At
June
30, 2008, excluding mortgages payable of our unconsolidated joint ventures,
we
had 37 outstanding mortgages payable covering 58 properties, aggregating
approximately $213.9 million in principal amount, all of which are secured
by
first liens on individual real properties. At June 30, 2008, our outstanding
mortgages payable were secured by real properties with an aggregate carrying
value of approximately $350 million before accumulated depreciation. The
mortgages bear interest at fixed rates ranging from 5.13% to 8.8%, and mature
between 2008 and 2037. In addition, at June 30, 2008, we had one outstanding
loan payable with a balance of $6.4 million, which is collateralized by cash
held in escrow and shown on the balance sheet as restricted cash. The loan
bears
interest at 6.25% and matures in 2018.
We
recognize the stress being placed on the value of real estate and our tenants
as
a result of the tightening of available credit and the weakening of the U.S.
economy. Although we have not experienced lease defaults, we cannot know whether
adverse conditions will affect our tenants or whether our properties will be
subject to same.
Results
of Operations
Comparison
of Six Months and Three Months Ended June 30, 2008 and 2007
Revenues
Rental
income increased by $203,000, or 1.1%, to $19.4 million for the six months
ended
June 30, 2008 from $19.2 million for the six months ended June 30, 2007. For
the
three months ended June 30, 2008, rental income increased by $44,000, or .5%,
to
$9.7 million from $9.6 million for the three months ended June 30, 2007. The
increase in rental income is primarily due to rental revenues earned during
the
six and three months ended June 30, 2008 on three properties acquired by us
in
the current six month period. The increase in rental income also results from
lease increases based on the consumer price index and from the exercise of
lease
options at several of our properties which extended the terms of such leases
at
a higher rent. The increases in rental income were offset in part by a $178,000
write off of the entire balance of the unbilled rent receivable of a property
where, although the tenant, who has vacated the premises, is current in the
payment of its rent, management has determined that collection of such balance
through the lease expiration is questionable.
Operating
Expenses
Depreciation
and amortization expense increased by $153,000, or 3.7%, and $189,000, or 9.1%,
to $4.3 million and $2.3 million for the six and three months ended June 30,
2008, respectively. The increase in depreciation and amortization expense was
primarily due to “catch-up” depreciation taken on a property which had been
classified as “held for sale” from August 2007 through March 2008. In June 2008,
the property was taken off the market and depreciation was recorded from August
2007 to June 2008 upon termination of the “held for sale” classification. In
addition, the increase was due to depreciation taken on properties acquired
in
the current six month period.
General
and administrative expenses decreased by $86,000, or 2.6%, to $3.2 million
for
the six months ended June 30, 2008. The decrease was due to a number of factors,
including $83,000 paid in the six months ended June 30, 2007 to an independent
compensation consultant retained by the Compensation Committee of our Board
of
Directors, with no comparable expense in the six months ended June 30, 2008.
Additionally, the annual amount paid under the Compensation and Services
Agreement was reduced by $100,000 in 2008 resulting in a $50,000 decrease for
the six months ended June 30, 2008. There were also decreases in the six months
ended June 30, 2008 in accounting and legal fees ($56,000), travel expense
($20,000), director fees ($16,000), state tax expense ($13,000) and
miscellaneous expenses ($13,000). These decreases were offset in part in the
six
months ended June 30, 2008 by an $81,000 increase in professional fees incurred
in connection with civil litigations, in which we are the plaintiff, arising
out
of the activities of our former president and chief executive officer. Further
offsetting the decreases in general and administrative expenses is a $21,000
increase in compensation expense related to our restricted stock program and
a
$62,000 increase in payroll and payroll related expenses for full time
personnel, primarily resulting from annual salary increases.
General
and administrative expenses increased by $13,000, or .8%, to $1,601,000 for
the
three months ended June 30, 2008, substantially due to a $78,000 increase in
professional fees incurred in connection with civil litigations, in which we
are
the plaintiff, arising out of the activities of our former president and chief
executive officer. The increase in general and administrative expenses also
includes a $30,000 increase in payroll and payroll related expenses for full
time personnel, primarily resulting from annual salary increases. These
increases were offset by a $100,000 decrease in the 2008 annual amount,
resulting in a $25,000 decrease for the three months ended June 30, 2008, paid
under the Compensation and Services Agreement. There were also decreases in
the
three months ended June 30, 2008 in travel expense ($17,000), director fees
($11,000) and state tax expense ($15,000). Further offsetting the increases
in
general and administrative expenses is a $27,000 decrease in compensation
expense related to our restricted stock program due to $65,000 of additional
compensation expense in the three months ended June 30, 2007 related to the
accelerated vesting of 5,000 shares of restricted stock that had been issued
to
a director who retired in June 2007.
At
June
30, 2008, we determined that the estimated fair value of a retail property
was
lower than its carrying value and we recorded a $752,000 impairment charge
for
the difference. Management had determined that the market rent for this property
was significantly lower than the current rent being paid by the tenant, who
previously vacated the property.
Real
estate expenses decreased by $9,000, or 6.9%, for the six months ended June
30,
2008, resulting primarily from repairs incurred at one property in
2007.
Other
Income and Expenses
Gain
on
dispositions of real estate of unconsolidated joint ventures for the six months
ended June 30, 2008 reflects the sale by one of our joint ventures of a vacant
property for a consideration of $1.3 million, resulting in a gain to us of
$297,000. The six months ended June 30, 2007 reflects the sale by another of
our
joint ventures of a vacant parcel of land, for a consideration of $1.25 million,
resulting in a gain to us of $583,000.
Gain
on
sale of unimproved land reflects our sale of five acres of excess land which
we
acquired as part of the purchase of a flex building a number of years ago.
We
recognized a $1.8 million gain in May 2008 from this sale.
Interest
and other income decreased by $714,000, or 68.3%, and $340,000, or 73.8%, to
$331,000 and $121,000 for the six and three months ended June 30, 2008,
respectively. The decrease in interest and other income for the six and three
months ended June 30, 2008 results substantially from the decrease in interest
rates available for our investment in short-term cash equivalents. There was
also less cash available for investment after we paid a special distribution
of
$6.7 million to our stockholders in October 2007. Also contributing to the
decrease in interest and other income was the inclusion of a $118,000 gain
on
sale of available-for-sale securities in the six months ended June 30, 2007.
There was no such sale of securities in 2008.
Interest
expense decreased by $165,000, or 2.2%, and $101,000, or 2.7%, to $7.3 million
and $3.6 million for the six and three months ended June 30, 2008, respectively.
The decrease results from the payoff in full of two mortgages, one of which
matured in December 2007 (repaid November 2007) and the other which matured
in
July 2008 (repaid April 2008), as well as from the monthly principal
amortization of other mortgages. These decreases were offset in part by interest
expense on a fixed rate mortgage placed on a property in August 2007 and the
assumption of two fixed rate mortgages in connection with the purchase of two
properties in January and February 2008.
Discontinued
Operations
Income
from discontinued operations was $101,000 for the six months ended June 30,
2007
and resulted from the receipt of a settlement for a property that was sold
in a
prior year. There were no discontinued operations in the current year after
the
reclassification of a property from held for sale during the three months ended
June 30, 2008.
Liquidity
and Capital Resources
At
June
30, 2008, we had cash and cash equivalents of approximately $23.3 million.
Our
primary sources of liquidity are cash and cash equivalents, cash generated
from
operating activities, including mortgage financings and property dispositions,
and our revolving credit facility. We have a $62.5 million revolving credit
facility with VNB New York Corp., Bank Leumi USA, Manufacturers and Traders
Trust Company and Israel Discount Bank of New York. The facility is available
to
us to pay down existing and maturing mortgages, to fund the acquisition of
additional properties or to invest in joint ventures. The facility matures
on
March 31, 2010. Borrowings under the facility bear interest at the lower of
LIBOR plus 2.15% or the bank's prime rate, and there is an unused facility
fee
of one-quarter of 1% per annum. There is no outstanding balance on our facility
at June 30, 2008.
We
continue to seek additional property acquisitions. We will use our available
cash and cash equivalents, cash provided from operations, cash provided from
mortgage financings and property dispositions and funds available under our
credit facility to fund acquisitions, distributions to shareholders and
repurchases of outstanding stock.
We
had no
outstanding contingent commitments, such as guarantees of indebtedness, or
any
other contractual cash obligations, other than mortgage and loan payable debt,
at June 30, 2008.
Cash
Distribution Policy
We
have
elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended. To qualify as a REIT, we must meet a number of organizational and
operational requirements, including a requirement that we distribute currently
at least 90% of our ordinary taxable income to our stockholders. It is our
current intention to comply with these requirements and maintain our REIT
status. As a REIT, we generally will not be subject to corporate federal, state
or local income taxes on taxable income we distribute currently (in accordance
with the Internal Revenue Code and applicable regulations) to our stockholders.
If we fail to qualify as a REIT in any taxable year, we will be subject to
federal, state and local income taxes at regular corporate rates and may not
be
able to qualify as a REIT for four subsequent tax years. Even if we qualify
as a
REIT for federal taxation purposes, we may be subject to certain state and
local
taxes on our income and to federal income and/or excise taxes on our
undistributed taxable income (i.e., taxable income not distributed in the
amounts and in the time frames prescribed by the Internal Revenue Code and
applicable regulations thereunder).
Item
3. – Quantitative
and Qualitative Disclosures About Market Risk
All
of
our long-term mortgage debt bears interest at fixed rates and accordingly,
the
effect of changes in interest rates would not impact the amount of interest
expense that we incur under these mortgages. Our credit line is a variable
rate
facility which is sensitive to interest rates. However, for the six and three
months ended June 30, 2008, there was no balance outstanding on the credit
line,
and thus, the effect of changes in interest rates would not have impacted the
amount of interest expense incurred during this period.
Item
4. –
Controls
and Procedures
As
required under Rules 13a-15 (e) and 15d-15 (e) under the Securities Exchange
Act
of 1934, as amended, we carried out an evaluation under the supervision and
with
the participation of our management, including our Chief Executive Officer
and
Chief Financial Officer, of the effectiveness of the design and operation of
our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934). Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures as of June 30, 2008 are effective.
There
were no changes in our internal control over financial reporting (as defined
in
Rule 13a-15(f) under the Securities Exchange Act of 1934) during the six and
three months ended June 30, 2008 that materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II –
OTHER INFORMATION
Item 4.
Submission
of Matters to Vote of Security Holders
We
held
our annual meeting of stockholders on June 13, 2008. At the meeting, each of
three directors nominated for election to the Board of Directors was elected
to
the Board. These individuals will serve on the Board until our annual
stockholders’ meeting in 2011 and until their successors are elected and shall
qualify. The number of shares cast for or withheld for each nominee is set
forth
below:
Name
|
|
Votes For
|
|
Votes Withheld
|
|
Charles
Biederman
|
|
|
8,686,921
|
|
|
979,271
|
|
James
J. Burns
|
|
|
8,672,746
|
|
|
993,446
|
|
Patrick
J. Callan, Jr.
|
|
|
8,662,216
|
|
|
1,003,976
|
|
At
our
annual meeting of stockholders, our stockholders voted to ratify the appointment
of Ernst & Young LLP as our independent registered public accounting firm
for the 2008 fiscal year as follows:
Votes
For
|
|
|
8,945,446
|
|
Votes
Against
|
|
|
140,927
|
|
Abstentions
|
|
|
579,818
|
|
Item
6. Exhibits
Exhibit
31.1
|
|
Certification
of President and Chief Executive Officer pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
|
|
|
|
Exhibit
31.2
|
|
Certification
of Senior Vice President and Chief Financial Officer pursuant to
Section
302 of the Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
|
|
|
|
Exhibit
32.1
|
|
Certification
of President and Chief Executive Officer pursuant to Section 906
of the
Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
|
|
|
|
Exhibit
32.2
|
|
Certification
of Senior Vice President and Chief Financial Officer pursuant to
Section
906 of the Sarbanes-Oxley Act of 2002. (Filed with this Form
10-Q.)
|
ONE
LIBERTY PROPERTIES, INC.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
|
One
Liberty Properties, Inc.
|
|
|
(Registrant)
|
|
|
|
|
|
/s/
Patrick J. Callan, Jr.
|
Date
|
|
Patrick
J. Callan, Jr.
|
|
|
President
and Chief Executive Officer
|
|
|
(principal
executive officer)
|
|
|
|
August
8, 2008
|
|
/s/
David W. Kalish
|
Date
|
|
David
W. Kalish
|
|
|
Senior
Vice President and
|
|
|
Chief
Financial Officer
|
|
|
(principal
financial officer)
|